Hubei High Court Clarifies in Second Instance that Inventive Microbial Strains Can Be Protected as Trade Secrets

Recently, the Hubei Provincial High People's Court issued a second-instance judgment in a dispute concerning the misappropriation of technical secrets related to a microbial strain, dismissing the appeal and upholding the first-instance ruling that found infringement had occurred and awarded damages of over RMB 5.9 million. This case provides significant guidance for the biotechnology sector, particularly regarding the choice of protection pathways for industrial microbial breeding achievements.

A bioengineering company based in Nanjing (hereinafter "Nanjing Company"), a research, development and production enterprise of biological enzymes, sought to protect its technical secret known as the "α-amylase GenScript-specific strain." This strain is not a biological material found in nature; rather, the Nanjing Company, through complex molecular biology experiments, introduced specific gene sequences into the strain, thereby significantly increasing the yield of α-amylase and endowing it with substantial commercial value. The Nanjing Company implemented strict confidentiality measures for the strain through employee handbooks, non-disclosure agreements, access control systems, and iris recognition systems.

The Nanjing Company discovered that various α-amylase products manufactured by a biochemical pharmaceutical company in Yichang (hereinafter "Yichang Company") contained specific gene sequences identical to those of its proprietary trade secret strain. Another defendant, a biotechnology company based in Hunan (hereinafter "Hunan Company"), was responsible for selling some of the infringing products. The Nanjing Company preserved evidence through notarized purchases, PCR testing and DNA sequencing conducted by third-party institutions.

In the first instance, the Wuhan Intellectual Property Court of Hubei Province found that the strain information constituted a trade secret, that infringement had occurred, and that the distributor did not constitute a joint infringer due to lack of evidence showing it "knew or should have known" of the infringement. The court ordered the Yichang Company to immediately cease infringement, destroy the infringing strain, and pay the Nanjing Company economic damages and reasonable enforcement costs totaling over RMB 5.9 million.

Both parties appealed the first-instance judgment. The Nanjing Company argued that the damages were too low and that the Hunan Company should be held jointly liable, while the Yichang Company denied all allegations of infringement, contending that a microbial strain per se cannot be protected as a trade secret and that the Nanjing Company lacked standing as the rightful owner.

The Hubei Provincial High People's Court, in its review, held that the disputed "α-amylase GenScript-specific strain" is distinct from biological materials discovered in nature. It is an intellectual achievement obtained through a series of experiments and screening efforts involving the design of specific sequences, construction of recombinant plasmids, and transformation into host bacteria—all involving inventive effort by the right holder. This strain carries within it specific gene sequences that were created, selected, and fixed by the right holder; these sequence information constitute technical information.

Trade secret protection targets the "technical information" itself, not the physical carrier. However, in the unique context of a microbial strain, the technical information (specific gene sequences) is inseparable from its physical carrier (the strain cells). To protect the strain is essentially to protect the genetic information embedded within it that is not known to the public. Anyone obtaining the strain would simultaneously obtain its core technical information.

Accordingly, the court examined whether the strain in question satisfied the elements of a trade secret. First, the right holder submitted an Intellectual Property Search Report issued by an authoritative search agency, demonstrating that the specific sequences of the strain had not been disclosed in any domestic or international literature prior to the alleged infringement. The Yichang Company also failed to prove that the strain had been disclosed through patent applications, academic conferences, product specifications, or other channels. Second, the strain is a core material used in the production of α-amylase and significantly enhances product yield. The right holder had used it to produce and sell products and earned profits, making its commercial value evident. Third, the right holder had enacted Employee Handbooks and Confidentiality and Non-Competition Agreements imposing confidentiality obligations on employees, and had also implemented physical controls over the strain and its research, development, and production premises through access control systems, infrared alarms, and iris recognition systems.

Therefore, the subject microbial strain constitutes a "technical secret" within the meaning of the law and is fully protectable as a trade secret under the Anti-Unfair Competition Law. This ruling strongly refutes the erroneous view that "biological materials cannot serve as trade secrets" and provides solid legal protection for the innovative achievements of biotechnology enterprises.